This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Earthport Hit By Apparent Fraud

I covered the position of Earthport (EPO) in the last ShareSoc Informer Newsletter in an article under the headline “Can these real dogs recover?”. The article covered several companies where profits had been negligible over the years resulting in investors becoming disillusioned but there were some signs of improvement. I said in concluding about Earthport (Monitise and Tungsten were the other companies) that “it’s fair to say that investors are losing confidence in Mr Uberoi (CEO) and are concerned about the bad news only dribbling out”. That was on the basis it was unlikely to meet earnings forecasts based on the latest revenue figures. But today (25/2/2016) there was some really bad news – the company announced that it had suffered a potential loss of up to £5 million at its subsidiary Baydonhill.

The announcement goes on to say: “The customer in question failed to honour pre-confirmed bank payment instructions, on the basis of which Baydonhill made payments on the client’s behalf in accordance with an established procedure which has been in place for over a year. Investigations were immediately initiated which indicated that the customer may have intentionally engaged in fraudulent activity. Additional enquiries found that the customer had filed notice to appoint an administrator. All relevant regulatory and law enforcement authorities have been informed and the Company plans to explore all avenues to recover this loss, but there are no assurances of any recovery.”

The company reassures investors that it has enough cash to cover the loss, but clearly with revenue last year of only £19.3m and no profits, this is going to have a substantial impact. The share price has been falling since mid January (did the news leak out one wonders), and at the time of writing is down 28% on the day. It surely demonstrates how tricky the “fintech” sector can be for investors.

Note that I have no holding in this stock at present although I used to have a small one.

Roger Lawson

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